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Self-Enforcing International Agreements and Domestic Policy Credibility

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  • Paola Conconi
  • Carlo Perroni

Abstract

We explore the relationship between international policy coordination and domestic policy credibility when both must be self-supporting. Our arguments are presented in the context of a two-country, two-period model of dynamic emission abatement with transboundary pollution, where government policies suffer from a time-consistency problem. In the absence of repeated interaction, any form of coordination - between governments, and between governments and their respective private sectors - improves policy making. Nevertheless, under repeated interaction international policy spillovers can make it possible to overcome the domestic credibility problem; and, conversely, the inability to precommit to policy domestically can help support international policy cooperation.

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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 988.

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Date of creation: 2003
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Handle: RePEc:ces:ceswps:_988

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Keywords: policy commitment; self-enforcing international agreements;

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Cited by:
  1. Conconi, Paola & Perroni, Carlo, 2006. "Do Credible Domestic Institutions Promote Credible International Agreements?," CEPR Discussion Papers 5762, C.E.P.R. Discussion Papers.
  2. Giovanni Maggi & Andrés Rodríguez-Clare, 2007. "A Political-Economy Theory of Trade Agreements," American Economic Review, American Economic Association, vol. 97(4), pages 1374-1406, September.
  3. Saggi, Kamal & Yildiz, Halis Murat, 2008. "Bilateral trade agreements and the feasibility of multilateral free trade," MPRA Paper 17561, University Library of Munich, Germany, revised 26 Jun 2009.
  4. Agur Itai, 2008. "The US Trade Deficit, the Decline of the WTO and the Rise of Regionalism," Global Economy Journal, De Gruyter, vol. 8(3), pages 1-34, September.
  5. Greetje Everaert, 2003. "The Political Economy of Restructuring and Subsidisation: An International Perspective," LICOS Discussion Papers 13003, LICOS - Centre for Institutions and Economic Performance, KU Leuven.

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